Serbia recorded a 22% annual decline in gross foreign direct investment (FDI) to €1.73 billion during January–August 2026, while net portfolio investment inflows reached €4.41 billion, according to the National Bank of Serbia (NBS). The figures indicate a shift in the country’s external financing structure, with international securities markets playing a larger role as direct investment weakens.
- Reinvested Earnings Decline as Foreign Investment Composition Changes
- International Bond Issuance Drives Portfolio Capital Inflows
- Companies Repay Foreign Loans as Banks Increase External Borrowing
- Manufacturing and Mining Support Export Growth
- Current-Account Deficit Narrows as Services Exports Expand
- Industrial Investment Faces Productivity and Financing Requirements
Portfolio investment reversed a €879 million net outflow recorded during the corresponding period of 2025, representing an improvement of approximately €5.29 billion in capital flows. Meanwhile, gross inward FDI fell from €2.21 billion a year earlier.
Net FDI inflows totalled €1.26 billion, approximately 2.5% below the previous year’s level. The smaller decline in net flows reflects a reduction in direct investment by Serbian residents abroad, which partly offset the decrease in foreign investment entering the country.
Reinvested Earnings Decline as Foreign Investment Composition Changes
Reinvested earnings within net direct investment decreased from approximately €1.19 billion to €839 million, a decline of almost 30%. Equity investment excluding reinvested earnings improved from a negative €64 million to a positive €142 million, while net direct-investment debt instruments increased from €159 million to €275 million. The decline in reinvested earnings points to weaker reinvestment by existing businesses. Foreign manufacturers frequently use accumulated profits to finance additional equipment, production lines, automation and factory expansion.
Changes in profitability, dividend distributions and corporate financing decisions also affect reinvestment figures, meaning the decline does not necessarily indicate that companies have cancelled planned projects. However, sustained weakness could affect the next phase of industrial expansion, particularly if demand in European markets remains uncertain.
International Bond Issuance Drives Portfolio Capital Inflows
The NBS attributed the increase in portfolio investment primarily to bond issuance by Serbian residents on international financial markets. The inflows helped raise the financial-account inflow, excluding changes in foreign-exchange reserves, to approximately €3.27 billion, compared with €1.82 billion in the corresponding period of 2025.
International securities markets provide Serbia with additional financing options for public investment, corporate development, refinancing and other funding requirements, depending on the issuer and the allocation of proceeds.
Portfolio investment and direct investment have different implications for productive capacity. A foreign manufacturer establishing a facility can introduce equipment, technology, employment and additional production capacity, while bond financing creates repayment obligations. Debt-financed investment can also support economic development when directed towards productive assets. Its longer-term contribution depends on borrowing costs, investment returns and the cash flows generated by the financed projects.
The NBS balance-of-payments data do not establish how much of the portfolio inflow funded new investment, refinancing or other transactions.
Companies Repay Foreign Loans as Banks Increase External Borrowing
Serbian enterprises recorded approximately €859 million in net repayments of foreign financial loans during the first eight months of 2026. In contrast, domestic banks registered €584 million in net foreign borrowing, while general government recorded approximately €60 million in net borrowing through financial loans.
Across these sectors, financial loans generated approximately €223 million in net repayments. The contrasting movements indicate that corporate borrowers reduced their external loan liabilities while banks increased borrowing from abroad. Additional bank funding could support lending to domestic clients, although its contribution to industrial investment depends on the availability of commercially viable projects and confidence in future demand.
Industrial developments typically require financing structures that accommodate construction periods, capital expenditure, currency exposure and uncertain returns during commissioning and production ramp-up.
Manufacturing and Mining Support Export Growth
Despite weaker FDI inflows, Serbia’s goods exports increased 9.3% year on year during January–August 2026, according to the NBS balance-of-payments methodology.
Manufacturing was the principal contributor to export growth, supported by motor vehicles, fabricated metal products and mining. Motor-vehicle manufacturing exports increased 48.2%, while exports from mining and quarrying rose 33.1%.
Electricity, gas and related energy-supply activities recorded a contrasting performance, with exports declining 47.5%. The European Union accounted for 62.6% of Serbia’s goods exports, underscoring the importance of European demand and production networks to the country’s industrial sector.
Automotive manufacturing, mining, industrial processing and associated suppliers remain important components of Serbia’s export base. Maintaining their competitiveness requires further capital expenditure, technological modernisation and greater participation in higher-value production.
Preliminary NBS data for the first half of 2026 show that manufacturing accounted for 36% of FDI inflows. Wholesale and retail trade represented 18.5%, construction 14%, mining 12.6% and electricity-related activities 9.5%. Manufacturing therefore remained the largest destination for new foreign capital among the listed sectors, despite the overall decline in investment.
Current-Account Deficit Narrows as Services Exports Expand
Serbia’s current-account deficit narrowed 14% to €2.11 billion during January–August 2026. The goods-trade deficit decreased 10.4% to €3.82 billion, while the services surplus remained close to €1.36 billion.
Services exports reached approximately €10.6 billion, supported by business services, information technology and tourism. Net remittance inflows increased to €3.41 billion, providing an additional source of external income. The primary-income deficit widened 20.1% to €3.69 billion, reflecting higher net income payments abroad. The increase highlights the cross-border payment obligations associated with foreign capital, including investment income and financing costs.
Industrial Investment Faces Productivity and Financing Requirements
Serbia’s manufacturing base requires investment in automation, specialised production equipment, energy efficiency, environmental compliance, advanced processing and supply-chain integration to sustain export competitiveness.
Energy-intensive exporters face additional requirements associated with electricity supply contracts, emissions measurement and EU carbon-border rules. These needs create demand for industrial financing supported by export contracts, credible business plans and measurable investment returns.
Infrastructure investment presents a related challenge for the government. Transport, electricity, energy and other projects need to generate sufficient long-term economic benefits to justify their financing costs. The combination of a 22% decline in gross inward FDI and €4.41 billion in net portfolio inflows highlights the changing composition of Serbia’s external financing. The figures also show continued export growth, alongside higher reliance on international securities markets and differing borrowing trends among companies, banks and the government.
